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The Skill Premium, Technological Change and Appropriability

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  • Nahuis, Richard
  • Smulders, Sjak

Abstract

This paper demonstrates that an increase in the relative supply of educated workers generates a structural change in the production structure towards a knowledge-intensive production process. This structural shift may ultimately lead to an increase in the return to educated labor despite the increase in their supply. The paper argues that the steady increase in the supply of educated workers that most Western economies have experienced in recent decades may be viewed as the driving force behind the observed pattern of wage inequality. In particular, the paper demonstrates that if firms can appropriate a sufficient share of the intertemporal return from knowledge generating activities of their labor force, a gradual increase in the supply of skilled workers would generate only a temporary reduction in the skill premium followed by a permanent increase in the return to skill. Copyright 2002 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 7 (2002)
Issue (Month): 2 (June)
Pages: 137-56

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Handle: RePEc:kap:jecgro:v:7:y:2002:i:2:p:137-56

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References

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  1. Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 469-497, May.
  2. Peretto, Pietro F, 1998. " Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
  3. Gould, Eric D & Moav, Omer & Weinberg, Bruce A, 2001. " Precautionary Demand for Education, Inequality, and Technological Progress," Journal of Economic Growth, Springer, vol. 6(4), pages 285-315, December.
  4. Adam B. Jaffe, 1999. "The U.S. Patent System in Transition: Policy Innovation and the Innovation Process," NBER Working Papers 7280, National Bureau of Economic Research, Inc.
  5. Acemoglu, Daron, 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," CEPR Discussion Papers 1707, C.E.P.R. Discussion Papers.
  6. Galor, Oded & Tsiddon, Daniel, 1997. "Technological Progress, Mobility, and Economic Growth," American Economic Review, American Economic Association, vol. 87(3), pages 363-82, June.
  7. Smulders, J.A. & Klundert, T.C.M.J. van de, 1995. "Imperfect competition, concentration and growth with firm-specific R&D," Open Access publications from Tilburg University urn:nbn:nl:ui:12-153407, Tilburg University.
  8. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May.
  9. Michael T. Kiley, 1997. "The supply of skilled labor and skill-based technological progress," Finance and Economics Discussion Series 1997-45, Board of Governors of the Federal Reserve System (U.S.).
  10. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
  11. Peretto, Pietro F., 1999. "Cost reduction, entry, and the interdependence of market structure and economic growth," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 173-195, February.
  12. Huw Lloyd-Ellis, 1999. "Endogenous Technological Change and Wage Inequality," American Economic Review, American Economic Association, vol. 89(1), pages 47-77, March.
  13. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
  14. Thompson, Peter & Waldo, Doug, 1994. "Growth and trustified capitalism," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 445-462, December.
  15. Bartel, Ann P & Lichtenberg, Frank R, 1987. "The Comparative Advantage of Educated Workers in Implementing New Technology," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 1-11, February.
  16. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  17. Keely, Louise & Quah, Danny, 1998. "Technology in Growth," CEPR Discussion Papers 1901, C.E.P.R. Discussion Papers.
  18. Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-71, September.
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Citations

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Cited by:
  1. R. Nahuis & H.L.F. de Groot, 2003. "Rising skills premia: you ain't seen nothing yet," Working Papers 03-02, Utrecht School of Economics.
  2. Smulders, Sjak & de Nooij, Michiel, 2003. "The impact of energy conservation on technology and economic growth," Resource and Energy Economics, Elsevier, vol. 25(1), pages 59-79, February.
  3. Volker Grossmann, 2005. "White-collar employment, inequality, and technological change," Journal of Economics, Springer, vol. 10(1), pages 119-142, December.
  4. Lei Ji, 2013. "Rethinking directed technical change with endogenous market structure," Documents de Travail de l'OFCE 2013-18, Observatoire Francais des Conjonctures Economiques (OFCE).
  5. Keiichi Kishi, 2013. "Dynamic analysis of wage inequality and creative destruction," Discussion Papers in Economics and Business 13-20, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).

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